Risks

A prime example of this is the dispute currently ongoing with Birmingham City Council (United Kingdom). As at December 2018, the company had posted provisions in the amount of GBP207 million to cover any liability eventually deriving from the dispute. For further information, please see Note 6.5.1 of the Consolidated Annual Financial Statements.

Meanwhile, the complaint brought by SH-130 Concession Company, LLC (United States) against the construction company, which is 50% owned by Ferrovial, alleging construction defects, continues to progress through the preliminary stages. In tandem with this claim, the concessionaire filed suit in March 2018 against the previous concessionaires (Ferrovial and Zachry) claiming breach of their trustee functions. See Note 6.5.1 to the Consolidated Annual Financial Statement.

• High degree of legal security in the regions and areas where projects are undertaken.
• Establishing contractual and safeguards and financial guarantees needed to safeguard the company’s interests.
• Active management of project risks.

The portfolio of technical references and the availability of partners with technical and economic solvency are also affected.

• Effective risk management affords the company competitive advantages when bidding on projects.
• Investment approval procedure whereby the company identifies and assesses the most relevant project risks and picks only those for which there are suitable risk management capabilities and which provide a genuine competitive advantage.
• The bidding activity focuses on technically complex projects in which the effective management of risks becomes a differentiator factor.

(For more information,
see Consolidated
Annual Financial
Statements note 5.4

In the case of Heathrow Airport, a possible stagnation or slowdown of the British economy is not expected to have any major impact on its business due to the importance of the asset and because it is already operating at full capacity. On top of this, the British government’s support for the plans to build a third runway illustrate the airport’s importance to the country, making it somewhat less exposed to the risk of Brexit.

Heathrow has released a report on the potential adverse impact in the event of a hard Brexit wiping 114-million-pound from the Budget for 2019. Meanwhile, S&P has announced its intention to maintain the airport’s rating but with a negative outlook.

• Continuous monitoring of the ongoing negotiations between the UK and the EU.
• Operational efficiency measures to be implemented across the various business units to respond to new market conditions.
• Continuous monitoring of the financial markets in order to hedge risks accordingly.
• Arranging hedge agreements to cover an amount roughly equivalent to the dividends expected to be received from UK assets over the coming three years.

In the specific case of Spain, growth prospects may be affected by political instability and uncertainty derived from political and social initiatives in Catalonia calling for the separation of the region from Spain.

Meanwhile, the political situation in the United Kingdom and the precarious position of its current government may well impact the planned expansion of Heathrow Airport, which was greenlighted by the British Parliament in June 2018 and which is continuing through the public consultation process eventually leading to the approval of the Development Consent Order.

• Permanent monitoring of any regulatory or legislative processes that may affect business, as well as possible political developments, in order to anticipate possible changes and manage them accordingly.

• Collaboration with security forces to implement the most appropriate security measures and systems to prevent attacks on company infrastructure.
• Cybersecurity measures to reduce the risk of unauthorized access to the company’s information and operating systems.

• Continuous collaboration and contact with workers’ representatives to forestall possible conflicts sufficiently in advance so that preventive measures can be adopted.
• Adhering to current labor law and regulations and ensuring strict compliance with the labor agreements in place as a means of mitigating the risk of disputes with employees.

• Contingency plans for each type of event.
• Health and safety systems to be implemented in all areas of activity.
• Insurance policy with coverage and compensation limits for accident liability, including environmental risks, events triggered by terrorist attacks or sabotade against company-managed facilities and infrastructure.

• Quality policy, quality management system by business area (ISO 9001) and implementation of key indicators to measure quality levels during project performance and provision of service.
• Audit plan to ensure compliance with the law, regulations, contractual obligations and objectives.
• Digital platforms to ensure compliance with technical legislation and regulations throughout all phases of the contract life cycle.

(For more information, please see the section on the Environment on page 73 and 78)

• Internal and external audit plan (ISO 14001 and EMAS mainly) to ensure compliance with the law, regulations, contractual obligations and objectives.
• Insurance policy with sufficient cover and compensation limits to meet possible liability arising from environmental risks.
• Measures to ensure compliance with and awareness of all applicable technical legislation and regulations.

• Ferrovial has implemented a process to identify and assess the risks arising from climate change in order to anticipate them sufficiently in advance to be able to implement remediation and adaptation measures in response to the new environment.
• Control and monitoring tools.

• Implementation of adequate health and safety systems to safeguard company activities under a zeroaccidents vision.
• Control and supervision of adequate occupational health and safety conditions at all work centers.
• Continuous training in occupational risk prevention.
• Permanent monitoring of management systems through internal and external audits.

• Ferrovial has drawn up a Compliance Model that embodies the principles of respect for current legislation, ethical integrity, transparency and zero tolerance toward criminal actions.
• Training on ethics and anticorruption.

Failure to honor contractual obligations with third parties, which may give rise to penalties or jeopardize project continuity and/or the company’s financial position.

• Compliance Model at Ferrovial.
• FRM process allows us to detect, assess and monitor the risk of non-compliance with obligations early enough to be able to take appropriate corrective measures.
• Compliance model supervision plan.

• Assessment and management of the risk exposure of the main financial variables: interest rates, exchange rates, share price, liquidity and credit. This analysis draws a distinction between the policies applied at infrastructure project companies and those applied at other companies (where this difference is deemed relevant).